I can't wait for tax season (said no one ever). As a nonprofit, you may think you don’t have to worry about filing taxes, but you’re very mistaken. Most nonprofits must file IRS Form 990 every year to keep their tax-exempt status. Read more to see if you are one of the many, when your taxes are due, and which of the nine IRS forms you must file.
You may assume that since nonprofits are tax exempt, they don’t have to file tax returns. The reality is most nonprofits do have to file nonprofit tax returns to keep their tax-exempt status. IRS Form 990 is the most commonly required tax form for nonprofits.
To help you prepare your nonprofit’s tax returns, we’ve included information on why and when nonprofits must file, which organizations don’t need to file a return, and links to IRS forms you’ll need to file.
In 1954, the Internal Revenue Service (IRS) code established nonprofit tax exemption for 501c organizations. Nonprofits must file an annual tax return to justify and retain their tax-exempt status. They must also share details on the organization’s mission, donations, and board members to build trust with the public. Nonprofits that file tax returns and share these details with the public show they can live up to their charitable purposes.
Nonprofits must file their tax returns at the same time as every other organization, on the 15th day of the 5th month after the end of their fiscal year. This date is May 15th for most organizations that use the calendar year. If the organization cannot meet the tax-filing deadline, it can file for an extension with the IRS.
Faith-based organizations like churches, religious schools, and mission organizations do not have to file a tax return. Donors who give to these churches can still claim a tax deduction for their gifts even if the church has never filed for tax-exempt status.
Government and state organizations that provide charitable services and nonprofits covered by a parent organization may also be exempt from filing annual tax returns. If the parent group files a tax return for all subordinate groups, and those groups share all financial details with the parent group, the subordinate groups do not have to file a separate tax return. An example of this type of organization is your local Parent Teacher Association.
If you are unsure whether you fit under these exemptions, it is best to check with the IRS.
The IRS has created different requirements and forms for nonprofits based on the type of nonprofit, tax-exempt status, and annual gross receipts. The following forms are available on the IRS website.
Nonprofits with gross receipts over $200,000 or total assets greater than $500,000 must file Form 990. Nonprofits filing this form must include the organization’s mission, names of the board members, donors, and foundation names, along with donation and grant amounts.
Nonprofits with less than $200,000 in gross receipts and less than $500,000 in assets can file Form 990-EZ.
Private foundations with gross receipts equaling more than $25,000 a year must file Form 990-PF. Foundations must share details on their investments and charitable distributions.
Small 501c nonprofits with gross receipts of $50,000 or less can file Form 990-N. This tax return postcard is entirely online. Some nonprofit organizations cannot file Form 990-N regardless of their gross receipt income. These organizations include private foundations, supporting organizations, section 527 political organizations, and other ineligible organizations.
Nonprofits file Form 990-T with other 990 tax returns to report unrelated business income, tax liabilities, claim refunds, and request credits for payments to investment and health insurance companies.
Political organizations must file Form 1120-POL to report taxable income and liability under section 527 if they have any political organization taxable income.
Private foundations use Form 4720 with Form 990-PF to report initial taxes imposed on private foundations, foundation managers, and disqualified persons.
Nonprofits can use Form 7004 to request a 6-month extension to file certain business income tax, information, and other returns.
Exempt organizations can use Form 8868 to file for an automatic 6-month tax extension. Trustees filing Form 1041-A and Form 5227 can also use this form to request an extension.
Nonprofits may choose to file tax returns themselves or hire a professional. It is advisable that organizations with complicated financial details should hire a professional or consult with a tax advisor.
The IRS has forms for each nonprofit type and income amount. Do your due diligence to determine which form best fits your organization. Consult an attorney if you’re about to do this for the first time and cannot be completely sure.
Every form requires you to fill in information about your organization for the whole previous year. Before you set out to file the form, you need to have all this information in place. Anything missing or wrong means unnecessary delay.
For Form 990, you’ll typically need the following information:
Make sure you read all instructions on the tax form. The IRS will return your tax forms and a letter to make corrections, but this delay can cause issues with grant funding. Again, professional advice and help are advisable unless you’re certain about the process.
As of July 2019, and the passage of the Taxpayer First Act, nonprofits filing 990 forms must file their taxes online. If your organization cannot finalize your taxes before the 15th day of the 5th month, file for an automatic extension using Form 8868.
Nonprofits must file taxes to remain tax-exempt. The IRS provides forms for every type of nonprofit organization to file taxes and claim tax-exempt status. Nonprofits may choose to file taxes themselves, but if your organization has gross receipts over $250,000 or complicated financial details, it’s best to hire a professional.
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Tax returns are due on the 15th day of the 5th month after your fiscal calendar ends.
Unless your nonprofit is a church, government, or state organization, or a nonprofit covered by a parent organization, you must file tax returns regardless of your income.
Nonprofits filing their tax returns late may receive a maximum penalty of up to $10,000 or 5% of the organization’s gross receipts. The penalty increases by $100 daily.
Nonprofits can file Form 8868 for an automatic 6-month extension on their tax returns. Organizations must also file Form 7004 to request an extension on certain business income taxes and other returns.
All Form 990 returns are public. Donors and foundations will research your organization’s tax returns to better understand your organization’s financial health.
If your Form 990 is missing information or incorrect, the IRS will send it back with one of the following letters:
Nonprofits may apply to get late filing fees abated, but there must be a reasonable cause for the delay.
Disclaimer: By sharing this information we do not intend to provide legal, tax, or accounting advice, or to address specific situations. The above article is intended to provide generalized financial and legal information designed to educate a broad segment of the public. Please consult with your legal or tax advisor to supplement and verify what you learn here.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
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Kristine Ensor